This study will analyze the impact of regulatory policy on the growth of the nursing home industry. In the past fifteen years, controls on health facility investment emerged as the dominant policy response to the continuing problem of health sector inflation. These policies, while applied universally to hospitals in the past, are only recently being implemented for long term care facilities on a widespread basis. The rationale behind this extension is derived exclusively from experience with the hospital sector, and yet substantial dissimilarities exist between the two forms of care. A detailed assessment of the theoretical and empirical basis for investment controls in long term care will be conducted. The project will describe and critique the process of nursing home regulation in fifteen states. Alternative forms of investment controls, alternative modes of implementation, and the interaction of investment controls with reimbursement policies will be examined to assess the consequences of currently relevant policy options. An econometric model of the nursing home industry will be estimated. Particular emphasis will be placed on measuring regulatory variables in the model's development. Differences in coverage, sanctions, implementation methods and availability of resources for enforcement will be incorporated. The model will measure the impact of regulation on the key supplier decisions related to investment, price, quality (input based), and composition of residents by severity of infirmity. It also will describe the determination of net admissions and the share of residents supported by Medicaid.